Sova Capital Limited, Re

For a hard bar date to close a client money pool, the court must be satisfied that the administrator has taken all reasonable measures to identify and contact potentially entitled persons and that there is no reasonable prospect of a further claim after the proposed date. The phrase “no reasonable prospect” must be understood in the light of the statutory policy of facilitating an expeditionary and orderly closure of the client money pool. The court retains a discretion whether to approve the date even when the statutory conditions are met. Where the governing insolvency rules contain no mechanism for adjudicating client money or custody asset claims, the court may use its inherent jurisdiction to impose a suitable procedure where this would crystallise disputes and promote finality.

The joint special administrators of Sova Capital Limited, an investment bank in special administration, applied for approval of a hard bar date for claims for the return of client money under regulation 12C(3) of the Investment Bank Special Administration Regulations 2011. They also sought approval of a procedure for adjudicating client money and other non-client money custody asset claims under regulation 12D(1)(c), alternatively paragraph 63 of Schedule B1 to the Insolvency Act 1986 or the court’s inherent jurisdiction.

The issues were whether the statutory conditions for a hard bar date were met and whether a formal adjudication process should be imposed despite only one substantial disputed claim remaining and other potential claims being identified.

1. The applications were granted. The court approved a hard bar date and imposed the proposed claims adjudication procedure.

2. Under regulation 12D(2) of the Investment Bank Special Administration Regulations 2011, the court had to be satisfied that the administrators had taken all reasonable measures to identify and contact persons who might be entitled to the return of client assets, and had to consider that there was no reasonable prospect of receiving a further claim after the hard bar date. The phrase “no reasonable prospect” was to be read in the light of the policy of expediting and assisting closure of the client money pool. [2023] EWHC 2690 (Ch)

3. Those requirements were met. The administrators had used comprehensive and diligent communication and tracing measures. The remaining non-claimants had been dormant or unresponsive for several years, communications had been reasonably exhausted, most balances were small or related to dissolved companies, and no further claims had been received since the soft bar date. The statutory threshold was therefore satisfied.

4. Approval remained discretionary. A hard bar date was desirable because it would provide finality, assist closure of the client money pool and permit release of the retained balance for distribution.

5. The Investment Bank Special Administration Rules 2011, the client asset rules and the Regulations contained no procedure for adjudicating client money or custody asset claims. Following Re MF Global [2013] EWHC 1655 (Ch), the court could use its inherent jurisdiction to impose an appropriate procedure. It was proportionate to do so because the procedure could crystallise the outstanding claim and address similar arguments potentially advanced by other claimants.